Trepp | Mamdani Spells Trouble for NYC Multifamily Owners

Zohran Mamdani, the winner of New York City’s mayoral election, has proposed freezing rents at the city’s rent-stabilized apartment properties. He’s proposed other freebies, like bus trips and daycare, but we’ll focus on his promise to make apartments rents affordable—by, of all things, freezing them.

Mamdani has also proposed building another 200,000 units over the next decade, which would be the route to take to ease some of the city’s housing woes. But he aims to have the city build and own them. That’s an experiment that was undertaken during the 1930s and ultimately didn’t turn out well. New York City, through its Housing Authority, still owned 325 projects housing more than 400,000 tenants as recently as 2018. Many of those properties fell into disrepair during the 1970s and 1980s and became crime infested. Some became uninhabitable.

While the city has a strong mayor, in that the office has substantial sway over budgeting and personnel issues, freezing rents, or giving things away and creating city-owned grocery stores—another of his ideas—isn’t a slam dunk.
The city has a population of 8.48 million people, according to its Department of City Planning, and an estimated 2.39 million apartment units. A total of roughly 1 million of that is subject to the city’s rent-stabilization rules. Another 16,400 units are subject to stricter rent-control rules.

The amount that tenants pay monthly at rent-stabilized units is governed by the New York City Rent Guidelines Board, a nine-member panel appointed by the mayor. That, on its face, would indicate immediate issues for owners of stabilized properties. But the terms for board members are staggered, likely so one mayor can’t easily pull off what Mamdani is trying to accomplish. Meanwhile, Eric Adams, the outgoing mayor, has said he would extend the appointments of a number of members. So, Mamdani wouldn’t be able to effectively replace the board and execute his plan until 2027, at the earliest.

The board last met in June and approved, by a 5-4 vote, rent increases of 3% under one-year leases and 4.5% under two-year deals at rent-stabilized properties. At the time, Doug Apple, the board’s chairman, wrote in a statement that the city’s stock of rent-stabilized properties was at risk, as net operating incomes increased by only 0.7% after inflation between 2022 and 2023. That compares with the 12.1% increase in NOI for the city’s entire stock of apartment properties.

Apple also noted that prices for stabilized properties had declined last year by 37.6% from the previous year. Coupled with higher interest and mortgage rates, the city’s stock of affordable housing could deteriorate “as owners struggle to access the needed capital for major capital upgrades,” he wrote.

Mamdani’s rent-freeze proposal could further cripple landlords. Six years ago, they were clobbered by the Housing Stability and Tenant Protection Act, or HSTPA, which eliminated vacancy decontrol, which allowed rents to climb to market levels once they were vacated. The law has been a large contributor to the decline in prices for stabilized properties.

Mamdani not only wants the city to build, and own, 200,000 apartments, but he has also threatened to take over properties that had been neglected in terms of maintenance and repairs. To pay for all that largesse, the mayor-elect has pulled another rabbit out of his Democratic-Socialist hat—jacking up taxes. His plan is to increase the city’s corporate tax rate to 11.5%, making it the highest in the country. He’s also proposed imposing a 2% tax on annual incomes greater than $1 million.

As an aside, the price for a one-way 20-foot U-Haul truck from New York to Miami is $3,276; to Nashville, Tenn., it’s $1,459.

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